Media Companies

You never really know what you might uncover about a business by reading the annual report of another… continue…

by Ben MacNevin Posted in Media Companies.

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At this time each year, we look forward to the release of Warren Buffett’s missive to his Berkshire Hathaway shareholders. Most interesting to me is this year’s discussion about Newspapers. It is interesting because there was a time, not that long ago, when Warren Buffett had said he would not buy a newspaper at any price. As you read this year’s Letter, you quickly discover Warren Buffett can quickly change his view…

It may interest you to know that during the past fifteen months, he and Charlie acquired 28 daily newspapers at a cost of $344 million.
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by Roger Montgomery Posted in Market commentary, Media Companies.

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Free-to-air-TV is doing it tough.

Two of Australia’s highly respected and sought-after media executives, James Warburton from Ten Network and APN’s Brett Chenoweth, have lost their jobs in as many weeks.

Network Ten’s (ASX:TEN) strategic position appears confused and it is stuck between a rock and a hard place.

Is it trying now to appeal to a broader demographic, where it is a clear number three; or will it return to the youth audience, where their move away from linear television is gaining traction?

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by David Buckland Posted in Media Companies.

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In this edition of Ross Greenwood’s Radio 2GB program, Roger recaps his highlights of the half-year reporting season with Ross, and also provides his insights into the prospects of Jumbo Interactive (JIN), Fleetwood (FWD) and Ten Network (TEN).  Listen here.

This program went to air on 26 February 2013.

by Roger Montgomery Posted in Media Companies, Radio.

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Newspapers around the world are being forced from their printed rivers of gold into the online realm in order to survive and thrive. While the industry has struggled over the past decade to establish itself with profitable online models, they have enourmous potential because of there penetration. There are a number of papers that have unlocked the secret to providing the right amount of free content and generating reasonable returns – the Financial Times and the New York Times are two papers that are setting the online benchmark for the world to follow. Fairfax is about to launch a metered paywall in March for its metropolitan mastheads (the Sydney Morning Herald and the Age) – with the path already forged before it, can Fairfax successfully manage its online assets to turn around its ailing print division?
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by Ben MacNevin Posted in Media Companies.

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In November Fairfax Media sold its specialist agricultural media business in the US for $76m.

Yesterday, Fairfax Media sold out of their 51% stake in the New Zealand based on-line and classifieds site Trade Me for $616m.

In a matter of weeks the Company has raised $690m.

This compares with their net indebtedness of $1.49 billion and 30 June 2011 and $914m at 30 June 2012.

Capitalised at $1.25 billion (2,352m shares on issue X a $0.53 share price), we suspect a number of “value investors” will jump on board as Fairfax Media becomes less financially leveraged.

Montgomery believes Fairfax lost its identifiable competitive advantage to several internet offerings many years ago and we will not be tempted. Having said that, we also believe that a digital transformation is under way and the right people for the job are being mobilised.

As you know we aren’t speculators and our process requires us to see evidence of the turnaround occurring. A demonstrated track record is required if we are going to invest rather than speculate. And as we have pointed out recently the shares are as close to an estimate of intrinsic value as they have ever been in the last decade.

by David Buckland Posted in Media Companies.

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Fairfax have announced that they are selling their holdings of Trade Me group, which is an online classified platform in New Zealand. Despite Trade Me being one of Fairfax’s key performing assets (comprising $86 million of the group’s $506 million in earnings in FY12), it is being sold down to reduce Fairfax’s net debt.

Many would argue they are cutting down the roses to water the weeds but before jumping on that bandwagon, it suggests to me they have a plan. I reckon its an online plan and one they believe they can repeat.

The proceeds are required to “provide the financial flexibility to invest and to complete the company’s structural transformation”. While it makes you wonder how successful the company’s “structural transformation” will be if they offload this river of gold I reckon they have a plan to repeat their Trade Me success. The database is huge and with the right offering(s) they have the opportunity to dominate mobile the way no-one has yet. Oh, and its interesting that the share price is the closest its been to intrinsic value (according to Skaffold.com) in a decade…

by Ben MacNevin Posted in Media Companies.

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by Roger Montgomery Posted in Media Companies, TV Appearances.

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CVC has wrestled with its ownership of Nine ever since it bought the network from James Packer’s PBL Media for $5.3 billion in 2007.  And now CVC’s man Adrian McKenzie has quit the nine board and Goldman Sachs as swapped debt for equity.

Equity owners are last in line and its a salient lesson for investors who must always remember that there is a very high risk owning businesses. In this environment of low interest rates its easy to value companies on equally low discount rates to try and produce a valuation close to the current price to justify a purchase. This is the basic lesson for CVC.

Even in an environment such as this we’d be using 10%, 11% even 13% required returns and walking away from anything that is not cheap enough.

With money burning holes in pockets and fees based on the employment of capital the temptation to bit off more than one can chew is ever present.

The late Kerry Packer taught the world a valuable lesson when he said ‘You only get one Alan Bond’. And James was obviously paying attention.

by Roger Montgomery Posted in Companies, Media Companies.

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PORTFOLIO POINT: Ten may benefit from improved market conditions, but the TV network owner needs to make up a lot of lost equity ground for its shareholders.

If you read the financial press regularly (and there are good reasons not to), one topic that may have caught your attention is the difficulties faced by our main free-to-air commercial television networks.

Channel Nine, struggling under the weight of a private equity capital structure, has led the charge, but Seven and Ten have followed not far behind. The news for all three has focused on earnings disappointments, equity raisings, asset sales, and various other “restructuring” initiatives – none of them good for equity holders.

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by Roger Montgomery Posted in Media Companies.

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